This Scheme is framed to provide guarantees regarding credit facilities extended by Lending Institutions to borrowers in Micro and Small Enterprises (MSEs).

The scheme was initially launched only for Micro Enterprises but was further extended to small enterprises in 2006.

Type of Credit facility offered

• Term Loans and
• Working capital loans

*Special Category

1. Women/SC/ST / Person with disability (PwD)/ Agniveer
2. Aspirational District / Identified Credit Deficient Districts (ICDD)
3. ZED Certified

**Particular Region

1. People of NER (North Eastern Region) incl. Sikkim, U.T. of Jammu & Kashmir & U.T. of Ladakh (Up to Rs. 50 Lakh)

Maximum Guarantee coverage is up to 85% of the loan amount

Whom to approach and Maximum Caps:

• 5 Crores(Public Sector Banks, Private Sector Banks, Foreign Banks, select Financial Institutions.
• 2 Crores(Small Finance Banks (SFBs), Regional Rural Banks, State Financial Institutions and Scheduled & Non-Scheduled Urban Co-operative Banks, State & District Central Co-operative Banks).
• 50 lakh(Microfinance Institutions).

Eligible NBFCs are also included in the scheme, and borrowers can approach them for assistance.

Charges:

Annual Guarantee Fee (AGF), is charged on the:

• Guaranteed amount for the first year and,
• On the outstanding amount for the rest of the tenure.

Value is as per the slab provided under the said scheme.

There are concessions @10 % for the following categories of people:

1. Women/SC/ST / Person with disability (PwD)/ Agniveers
2. People of NER (North Eastern Region) incl. Sikkim, U.T. of Jammu & Kashmir & U.T. of Ladakh (Up to Rs. 50 Lakh)

• Aspirational District / Identified Credit Deficient Districts (ICDD)

1. ZED Certified

Cons

• This scheme only waivesoff the collateral security requirements, primary is still needed.
• The SARFAESI Act is applicablefor the un-guaranteed amount.

Pros

• Availability of Collateral Free Loans
• Ease of Business
• Swift Financial assistance
• Healthy Eco-System
• Makes International Competition Viable.

Definitions

(Manufacturing Enterprises and Enterprises rendering Services)

Micro Enterprises: Investment in (Amount in Rs.)

• Plant and Machinery or Equipment:Less Than = 1 Crore

Annual Turnover: Less Than = 5 crore

  Small Enterprises: Investment in (Amount in Rs.)

• Plant and Machinery or Equipment:Less Than = 10 Crore
• Annual Turnover: Less Than = 50 crore

Credit Facility: Any financial assistance by way of:

• The term loan, and/or,
• Fund based and
• Non-fund-based working capital (e.g. Bank pg. 1 Guarantee, Letter of credit, etc.)
• Other Facilities extended by the lending institution to the eligible borrower.

Eligible borrower: New or existing Micro and Small Enterprises Tenure of guarantee cover: maximum period of guarantee cover from its sanction date to the tenure of the term credit and for a period of 5 years or block of 5 years from the Guarantee start date where working capital facilities alone are extended or loan termination date, whichever is earlier or such period as may be specified by the Trust.

Trust:  Credit Guarantee Fund Trust for Micro and Small Enterprises set up by Government of India and SIDBI.